Media earnings: Megamergers in focus

When media giants Time Warner and Twenty-First Century Fox report earnings Wednesday, investors will listen for what their results might mean mean for a potential merger between the two. The quarterly reports—and their earnings calls—are a crucial opportunity for both companies to make their case to investors: Fox for buying Time Warner, Time Warner for staying independent.

For Fox, which reports after the bell, the question is how it'll grow its stock's value. The stock is the currency for its proposed acquisition, comprising 60 percent of the offer. Other key factors investors will be watching include the company's buyback plan, its debt, the health of its advertising business—particularly in light of lower ratings at its eponymous network—and succession plans after the eventual retirement of Rupert Murdoch.

The biggest question is whether the company is willing to raise its bid for Time Warner, which reports before the bell. And if it is willing to spend more, how much? And will Murdoch, who hasn't been on a Fox (and before that News Corp.) call for years, be on this week's call?

"There seems to be a logic to the transaction," said BTIG analyst Rich Greenfield. "What are the key things that the companies can do together that neither can do on its own? In a rapidly changing landscape where you're looking at consumers spending more time on digital and the rise of more over-the-top brands like Netflix, it does seem like this creates an opportunity to create a pretty compelling online video platform." Greenfield said he wants to hear from Murdoch on how and where he sees those opportunities.

And from Time Warner CEO Jeff Bewkes, Greenfield said he wants to hear "what are we missing," i.e., why the two companies shouldn't combine. (Bewkes previously asserted that the company is more valuable on its own, rather than under Murdoch's control.) The earnings call will provide for him a key opportunity to lay out his vision for the company, and how he will rev up value.

How is Turner Broadcasting rebounding from ratings declines, and will it be able to shake off advertising weakness? What are his plans to offer HBO as a stand-alone service overseas, potentially a huge new revenue stream?

And though Bewkes has insisted "continuing to execute on our current strategic plan is the best path forward for the company and our shareholders," investors will be listening very carefully for any clue that Bewkes is open to a deal, at what price and on what terms.

All the other media giants reporting this week are sure to also face questions about where they fit in with media megamergers. Other pending deals include potential combinations of Comcast and Time Warner Cable, and AT&T and DirectTV.

Disney CEO Bob Iger is likely to point out that the largest media conglomerate has been focused on acquiring content and brands—most recently LucasFilm—and integrating those purchases. RBC Capital Markets analyst David Bank says, "I don't think they need to buy anything ... if you believe in the sizzle in the quarter, the World Cup, 'Frozen,' they're going to sound very good."

Since CBS and Viacom are both controlled by Chairman Sumner Redstone, nothing's likely to happen with those two, which Redstone split up back in 2006. How they are faring with an advertising slowdown is also sure to be a big question—especially for CBS, which relies more on advertising than the other media conglomerates. Analysts are sure to listen for any clue about where those companies could strike deals to keep up with ever-growing rivals.

—By CNBC's Julia Boorstin

Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC and CNBC.com.